Buying a Business: A Practical Guide to Getting It Right

Acquiring a business can be an exciting opportunity to expand your operations, enter a new market, or take your first step into business ownership.

Whether you’re acquiring a small family-run business or a more complex corporate operation, careful planning, due diligence and expert legal guidance are key to protecting your investment. Here’s what every prospective buyer should consider before committing to a deal.

1. Start with a Term Sheet

Most transactions begin with a Heads of Agreement or Term Sheet, which outlines the key commercial terms—such as price, structure, and settlement timing. While generally non-binding, these documents are important for aligning expectations early and can include binding confidentiality or exclusivity provisions.

2. Choose the Right Deal Structure: Assets or Shares?

How you structure the acquisition will impact everything from tax to liability and regulatory compliance.

• Asset Sale: You acquire specific business assets (such as goodwill, equipment, and contracts), without assuming legacy liabilities. This structure is considered lower risk as you will be starting with a clean corporate structure; however can require more work to transfer assets and assign leases and contracts.
• Share Sale: You acquire shares in the company that operates the business, inheriting all assets and liabilities. This is inherently riskier and requires strong warranties and security from the vendor.

We advise on the legal implications of both, and can advise you on ways to manage risk associated with known and unknown liabilities and can help you determine the most suitable approach.

3. Conduct Thorough Due Diligence

Due diligence is essential for understanding the true position of the business and identifying risks that may affect price, terms, or even your decision to proceed. Due diligence should cover the following:

• Contracts (customer, supplier, lease, finance etc)
• Employment matters (awards, entitlements, disputes)
• Intellectual property (ownership, registrations)
• Regulatory compliance and licences
• Litigation history or potential claims

Due diligence findings often inform the negotiation of warranties, indemnities and conditions in the final agreement.

4. Understand the Key Legal Documents

The main legal agreement—usually a Business Sale Agreement or Share Sale Agreement—should reflect all negotiated terms and allocate risk appropriately.

Other documents may include:

• Section 52 Statement (Victoria): Required for businesses under $450,000 in sale price
• Assignment or renewal of leases
• Escrow deeds or retention arrangements for deferred payments

Our role is to ensure these documents clearly protect your interests and cover all critical risk areas.

5. Employees: Know What You’re Taking On

Staff may be transferring with the business. It’s important to determine:

• whether you are offering employment to all or selected staff
• if and how accrued entitlements (e.g. annual leave, long service leave) are being recognised
• whether a new employment contract will be issued
• what obligations arise under awards, enterprise agreements or legislation.

6. Licences, Regulatory Approvals and Third Party Consents

In regulated industries—such as financial services—you may need regulatory approval or transfer of licences before completion. You may also require third-party consents (e.g. from landlords). These conditions should be identified early and included in the sale documentation as conditions precedent (requirements that must be satisfied before completion).

7. Transition and Handover Support

A successful acquisition doesn’t end at settlement. Transition planning should include:

• handover assistance from the vendor
• transfer of business systems and passwords
• introduction to key clients and suppliers

Where needed, your business purchase agreement can include obligations for the vendor to support continuity.

Final Thoughts

Buying a business is a significant commercial and legal undertaking. While every transaction is unique, the common thread is that success depends on early advice, clear documentation, and careful risk management.

At Nicholas O’Donohue and Co, we regularly advise clients—from first-time buyers to seasoned investors—on how to structure, negotiate and complete business acquisitions with confidence. If you’re considering buying a business, we’re here to guide you through every step.

Our Corporate and Commercial team is available to assist with any questions you may have.

For assistance contact us.